Good credit in a bad economy can make the difference between thriving and not surviving. Good business credit provides cash for expansion, capital expenditures, and staffing when your creditors collapse due to lack of funds.
Cash flow and liquidity can be improved through trade credit. A cash-rich business can take advantage of urgent opportunities without jeopardizing day-to-day operations.
Dun and Bradstreet owns the business credit assessment market in the United States. If you want to play the business credit game, you have to master their court. Putting yourself in a position to take advantage of a good credit rating is smart business. Trying to recover from a bad grade is next to impossible.
D&B is a private for-profit company. You must deal with them carefully to reap the rewards and that your own information is not used against you.
D&B Rating measures a company’s business credit rating against other companies in the same field. Data are provided on net worth, assets, number of employees, and financial stability and risk. Other factors include the age of the business, business payments, payment history, and public appearances.
Dun and Bradstreet makes money selling this information to banks, insurance companies, vendors, and government agencies.
More and more companies examine a supplier’s D&B rating before entering into contracts. Cost savings up front from a risky supplier can put large corporations and projects in jeopardy if that supplier goes bankrupt before completion. Dun and Bradstreet help assess those risks.
Even if you don’t need credit yet to expand your business, you’ll want to sign up with Dun and Bradstreet. Even with federal, state and local contracts, a DUNS number is a basic requirement for bidding on most projects.
A DUNS number is required to register with the Central Contractor Registration System (CCR) for federal government contracts. CCR is the primary database for the Departments of Defense, Transportation, and Treasury, as well as NASA and others. As of October 1, 2003, a supplier must be registered with the CCR to receive contracts and purchase orders from most federal agencies.
To establish or improve your profile with Dun and Bradstreet, the following strategies should help:
1. Update your information at least once or twice a year, or when changes occur within your company.
2. Pay your bills on time. Make it the religion of your company. Nothing will help your D&B score more than letting other companies know that you pay on time.
3. For a new business, consider paying before you even receive the invoice. Order. Pay when you receive the goods. Your Paydex score is based on how quickly you pay, not just the due date.
4. Make sure your business has a business listing in your local Yellow Pages or directory assistance. A business landline shows that you are here to stay, even for a home business.
5. Establish capital lines of credit (ELOC) before you need them. As Harvey Mackay once titled his book, “Dig Your Well Before You Thirst.”
6. If you are paying your creditors and vendors on time, make sure those payments are recorded in your profile.
7. Although your business and personal credit files are separate, keep your personal credit current. You don’t know when a potential bank or creditor will want a spike in your personal creditworthiness.
Business credit has become a primary method of determining business loan terms, lease payments, and insurance premiums. Using your D&B report, businesses will determine whether or not to sell to your business, lease equipment, offer a line of credit, or even do business with you rather than your competitors.
Improving your business credit profile will help your business borrow at lower interest rates, lower your cash outflow, lower your insurance premiums, and acquire new customers. You can improve your D&B rating by monitoring and updating your file online, or by hiring professionals to help you.